Eastman Kodak
Eastman Kodak went through a considerable transformation change since it was founded. The organization structure at Eastman Kodak was a typical classical hierarchy with the CEO overlooking the entire organization. Later in 1984, the company went through a transformation change in which it was reorganized into 29 separate business units grouped into four lines of business. It included Photography (PPG), Commercial and Imaging Group (CIG), Chemicals (EC), and Health (HG) and three international segments. Each group operated under its own general manager.
Later again in 1988, Eastman Kodak launched an Information Systems Department (ISD) which was responsible for development of business applications and management of small-scale computer network operations.
After going through change management organization, Eastman Kodak made alliances with IBM, DEC and Business Land. The new organization consisted of three distinct organization entities: Kodak’s Corporate IS organization; Kodak’s Business Group/ Business Unit IS organizations and the Alliance organization.
The strategic stand during the transformation change at the beginning was focused on downsizing its business core units by cutting employment by 10%. Cutting costs was also a priority as they moved to outsourcing of some of its business processes, especially in the IT area if it met its core function of the company or if there was value in it.
ISD was responsible for management of large data centers and voice and data communications. Eastman Kodak had its own IT management department that supported services that were not outsourced.
The type of culture that existed at Eastman Kodak was also transformed significantly. The major change was when part of its business processes was outsourced to other companies because employees had to adapt to whole new environment even though it was not a total change. Employees that had worked for Eastman Kodak for years are the ones that may have been affected most because they probably were used to the hierarchical type of leadership.
I think organization structure is the one that must have had an impact on other elements like IT because mainly after outsourcing some of its services. It meant that whatever decision these other element make or change, they had to consider the new allied division so to make sure its strategies are in line with their business processes.
A decade later, Eastman Kodak is still the leader in photo imaging and other services. The company has a website on which it markets its products and services to a number of different customers. The website also contains a number of websites in different languages worldwide. The overall new structure of the company is divided into three groups consisting of Consumer Business Group, Commercial Business Group and Global Operations with each group with sub units.
The company has introduced new products and services since the 80’s. One of the achievements is its introduction of a new division in the imaging area called Digital and Applied Imaging. It was formed in 1994 with a focus on various digital imaging programs.
I agree with Hudson’s approach for selecting outsourcing partners and negotiating the agreements. The reason is because she had consulted an outside vendor to study Eastman Kodak’s IT services and on top of that inquired with other internal and external studies to yield to the decision of outsourcing. I would have done the same thing. It is because when you make inquiries about something, you get a different perspective or see things at a different angle than what you had in mind. It helps you make a better decision than if you do not ask questions.
If I were going to do something different, I would have followed the same procedure with the exception that whatever I found from my inquiries, I would not have outsourced. Instead I would have tried to improve the current IT infrastructure to support the services needed. It would mean that hiring new IT personnel and training existing employees to new equipment and services. I would not have to worry about introducing new benefits for employees or even losing my current employees.
I think the most critical role Katherine Hudson played at Eastman Kodak was a team leader. The reason is because it requires a lot of effort and energy to drive people to accomplish goals. It says in the case that to implement the organization change, she had to recruit a strong manager and provide executive leadership.
The role of leadership has changed since it was founded. It is mentioned in the case “Kodak was still organized as a classical hierarchy, with the CEO presiding over a single monolithic functional structure.” This was very much a typical organizational structure in long time ago. A lot of companies had one person being in charge of over a whole company. I mean all decisions were made final by the chairperson. Nowadays it is the technology that has changed the organization structure of companies, partly because of luck of knowledge from the presiding person to make decisions on IT.
This is true that fact that at Kodak, for example, the CEO Colby Chandler had hired a personnel that was experienced in the field of information technology. Katherine Hudson was made to be the head of Corporate Information Systems at Kodak She was likely given the autonomy to make the decisions in implementing the change management organization of course she had to report to the CEO on the status of the process.
Another fact was the decentralization of business units in which they assumed control of the functions needed to produce their own products. So leadership role has changed significantly at Eastman Kodak since it was founded.
The outsourcing practices undertaken by Eastman Kodak mentioned by Lacity and Willcock would be described as selective. This included outsourcing data centers, software development, and telecommunication/networks and support services. The decision to undertake selective outsourcing was sponsored by what Lacity and Willcocks call, senior executive sponsorship, because it consisted of only top-level management. Colby Chandler created the CIS department but appointed Katherine Hudson to be the head of the department. Hudson did a research on the companies IT services and decided to outsource non-core businesses and services.
According to Lacity and Willcock, “senior executives realized their expected cost savings only 40% of the time when they outsourced IT.” Straussmann says the reason why companies outsource is because they are in financial trouble. Eastman Kodak was outsourcing to cut costs.
These findings are only applicable to cases that were studied. The reason being is that decisions were made at the top-level management without IT manager’s full input. At Eastman Kodak, the decision to outsource was made by Hudson after making inquiries. As a result their realized cost savings were 15% which is not all that great but the fact that they did not even have a CIS department before to do any consultations.
Eastman Kodak presented the economics of consolidating Kodak’s data centers within the company which would operate at 600 millions of instructions processed per second (MIPS). Lacity and Willcock say “Data center MIPS was selected because this indicator has been systematically tied to theoretical economies of scale”. So for large data centers according to the findings, at 150 MIPS or greater could achieve economies of scale. Either way Eastman Kodak team decided to with they still would have achieved economies of scale whether it meant consolidating or not because the MIPS was still greater than 150 MIPS.
Eastman Kodak signed a strategic alliance/partnership with IBM, DEC and Business Land. It is mentioned in the case with a set of criteria that qualifies it to be described as a strategic/partnership. Some of the criteria mentioned in the article could be applied to the partnership, for example, Integration defined as “partners develop organizational linkages so they work together smoothly”. Kodak and its partners had to work something out in the “service delivery process” when it came to purchasing a pc for a Kodak end user.
The advice I would give Hudson concerning long-term management of Eastman Kodak’s networked IS organization is that she would want to consider automating the business processes with the Alliance organizations if they plan on outsourcing their services for over a long period of time. The benefit would be cost reduction time wise and faster service and product to customers. Some of the processes I noted are used on their websites (www.kodak.com), for example, delivering pictures to customers through email.
I think, as a company grows bigger, like Eastman Kodak has, its business processes become complex, and in this case, its complexity includes outsourced services. I think Eastman Kodak can benefit from this and so can the allied partners. An example is given in the case over service deliver process in which it says, “a Kodak end user acquiring a personal computer from Business Land had to contact not only Business Land but also IBM to establish a mainframe account, and DEC to install network connections.” I think there are processes that have not been realized yet that can be supported by an automated system but can only be realized as time passes.
